Canada's $1 Trillion Defence Buildout Could Strengthen Canadian Industry

Canadian Chamber's Business Data Lab analysis identifies major opportunities but warns procurement barriers could limit how much economic value stays in Canada

Ottawa, Ontario--(Newsfile Corp. - September 29, 2026) - Canada's historic increase in defence spending could strengthen national security while expanding the country's industrial and technological capacity, if it can manage to keep value here at home, according to a new report from the Canadian Chamber of Commerce's Business Data Lab.

Deepening Our Defence: Canada's Ambitious Task to Expand the Defence Industrial Base examines the scale of the coming investment, where Canadian businesses are best positioned to compete and what needs to change for more of the economic value to remain in Canada.

Core defence spending is projected to grow from approximately $64 billion in 2025 to $160 billion by 2035 and could reach $228 billion annually if Canada meets the full NATO target of 5% of GDP. Altogether, more than $1 trillion in cumulative defence and security spending is expected over the next decade.

"Canada is about to put more than $1 trillion on the table. An investment of that size should leave us with stronger Canadian businesses, a deeper pool of skilled workers, more secure supply chains and technologies we can own and export," said Matthew Holmes, Executive Vice President, International and Chief of Public Policy, Canadian Chamber of Commerce. "But if this takes the form of a series of government purchases instead of a long-term effort to build capacity, much of the true opportunity for the country will be lost."

Canada enters this expansion with a relatively small and concentrated defence industrial base. Its 538 core firms generate $17.3 billion in annual sales, with roughly 80% of that revenue concentrated among the 50 largest companies. SMEs make up 92% of defence firms but account for only about 30% of industry revenue. Sectors that could benefit from the defence build-out, including metals, equipment manufacturing and construction, have spare capacity to expand production.

The challenge is that Canadian-controlled private firms account for just 18% of sales, leaving many decisions about intellectual property, production and exports outside Canada. Core defence firms import 47% of their purchases, limiting how much procurement spending flows through Canadian suppliers, workers and communities.

Expanding domestic participation will require businesses to overcome several persistent barriers. Lengthy security clearances, limited access to capital, complex procurement processes and little visibility into future government demand make it difficult for companies to invest in facilities, technology and workers.

Canada will continue to purchase major equipment from trusted allies and global suppliers. New partnerships with the EU and existing alliances will still create substantial opportunities at home and abroad, since every new aircraft, ship, vehicle and defence system will require Canadian infrastructure, technology, components and long-term support.

The report identifies four especially promising areas for Canadian business:

• Maintenance, repair and overhaul: New equipment will require decades of spare parts, technical support and in-service maintenance.

• Construction, engineering and Arctic infrastructure: Bases, ports, airfields, shipyards, training ranges and resilient energy systems will need to be built or upgraded, particularly across the North and Arctic.

• Software, AI and autonomous systems: Canadian firms have strengths in mission software, artificial intelligence, sensors, secure communications, space technologies and simulation.

• Specialized components and supply chains: SMEs can enter the market by providing advanced manufacturing, testing, engineering and systems-integration expertise to major defence contractors.

Defence investment could also help more Canadian research reach the market. The industry is three times more R&D-intensive than manufacturing, and federal research funding in priority defence capabilities has more than doubled since 2014. Yet only 11% of innovative Canadian firms in Defence Industrial Strategy areas identified in the report had recorded related direct sales to the federal government.

Clearer routes from research to testing, demonstration and federal procurement would help Canadian firms establish a track record, retain intellectual property and compete for contracts. Developing export markets will be essential to sustaining a larger industry. Canadian defence exports reached $7.9 billion in 2024, nearly half of industry revenue, with exports to Europe, excluding the United Kingdom, growing 78% between 2022 and 2024.

"The expertise, talent and advanced infrastructure at Canada's leading research universities is a national asset that can be mobilized as the government increases defence investments. To develop sovereign capabilities that are vital to our security, resiliency and prosperity, we need clear pathways to bring this this research capacity to the table, connect with Canadian businesses seeking to innovate and translate the proposed spending increases into lasting economic impact." said Robert Asselin, CEO of U15 Canada, which collaborated on the report.

The report calls for clearer long-term purchasing plans, faster security clearances, simpler procurement and stronger recognition of Canadian content, SME participation, intellectual property and export rights.

Canada cannot produce every defence capability domestically. It can choose where Canadian control and security of supply matter most, where allied partnerships provide the best approach and how foreign purchases can create lasting work and expertise in Canada.

"Defence spending is an opportunity to advance sovereignty while crowding in significant private investment. Our research suggests that defence spending can support economic growth with many industries having the capacity to contribute to this tall task," said Andrew DiCapua, Principal Economist, Canadian Chamber of Commerce.

"At a time where Canada is facing significant headwinds, creating a predictable demand signal would give businesses the confidence to raise capital, expand facilities and hire skilled workers."

By 2035, the results should be visible in what Canada can build, maintain, adapt and export, and in how many Canadian businesses are equipped to compete.

Read the Full Report

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About the Canadian Chamber of Commerce - The Future of Business Success

The Canadian Chamber of Commerce is Canada's largest and most activated business network - representing over 400 chambers of commerce and boards of trade and more than 200,000 business of all sizes, from all sectors of the economy and from every part of the country - working to create the conditions for our collective success. The Canadian Chamber of Commerce is the undisputed champion and catalyst for the future of business success. From working with government on economy-friendly policy to providing services that inform commerce and enable trade, we give each of our members more of what they need to succeed: insight into markets, competitors and trends, influence over the decisions and policies that drive business success, and impact on business and economic performance.

About the Business Data Lab (BDL)

Turning the overwhelming amount of economic data out there into actionable insights is a challenge for many organizations. That's why the Business Data Lab (BDL), launched in February 2022 by the Canadian Chamber of Commerce, provides free tools and real-time insights that help organizations understand Canada's economy as it is now and as it could be in the future. With support from Statistics Canada and funding from Innovation, Science and Economic Development Canada, BDL strives to ensure that rapid economic change and shifting business dynamics don't leave Canada's decision-makers behind. BDL is democratizing data on Canadian business conditions. By providing future-focused, real-time, and local insights, we help organizations better understand and navigate the Canadian economy.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/316439

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